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Why the Dow Gave Back Most of Its Gains Today

After being up more than 90 points, the Dow ended up just 25. Here's why.

Until the end of the day, it appeared that the stock market was on track to make another run at new highs, with the S&P 500 coming within just a point of its closing record at its high point today. Yet toward the end of the day, the market gave up much of its gains, as the Dow Jones Industrials (DJINDICES:^DJI) gave up all of its 90-point gain before rebounding a bit to finish up 25 points on the day.

Market analysts blamed the pullback from stronger gains after the president of Germany's central bank criticized a program that the continentwide European Central Bank implemented to provide financial assistance by buying sovereign debt from countries that apply for the ECB's help. With Europe having been relatively stable lately and with favorable signs having come from Italy that its post-election impasse might get resolved favorably, the Bundesbank's action reminded investors that all is not well in the eurozone and that discord could threaten an eventual solution to the European financial crisis.

In the U.S. market, Verizon (NYSE:VZ) led the Dow higher, with the stock rising 2.75%. Reutersreported after the end of trading that the telecom giant has hired advisors to help it with a possible $100 billion bid to buy Vodafone's (NASDAQ:VOD) 45% stake in their Verizon Wireless joint venture, with the report claiming a roughly 50% stock, 50% cash deal. Recently, speculation has swirled over the idea that Verizon could take full control of its wireless division, yet a deal of such colossal magnitude will clearly involve complex negotiations and is far from a certainty.

Outside the Dow, stocks generally rose somewhat more strongly. ITT Educational Services (NYSE:ESI) soared 30% despite reporting decreasing new-student and total enrollment figures in its quarterly report. Net income dropped by nearly half on a 16% decline in revenue, but expectations were so low for the for-profit education company that those results managed to drive the stock higher. The episode is a good reminder that the beaten-down sector has plenty of room for growth if the worst-case scenarios for the industry don't play out.

Finally, Safeway (NYSE:SWY) plunged 14% after its earnings release missed expectations by a penny per share. The stock has soared in recent months on speculation that it could revamp its business to boost sales, but traditional grocery chains have been under pressure for some time from alternatives such as supercenters and deep-discounters. Safeway needs to keep searching for new ways to differentiate itself from its peers in order to stoke its growth fires for the future.

Author

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.
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